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This thread is dancing around something I've
wondered about for years. In the derivitives market, I fully understand
where the money comes and goes from. If I buy a futures contract or option
at 50 and it goes 100 and I sell it, my account is credited with 50 and one or
more other traders accounts are debited 50. At the end of the day the
books balance. However, If I buy IBM stock at 50 and it goes to 100 and I
sell it, where does that money come from? Is it offest from someone else's
account or is this new "wealth". Do the books balance or did the pie get
bigger. Conversely if I buy IBM stock at 100 and it goes to 50 and I sell
it, where did that money go. Did it get credited into someone else's
account or did it return to the place it originally came from. Was
"wealth" lost and did the pie shrink?
shawn
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Ray
Raffurty
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Thursday, August 01, 2002 5:17
PM
Subject: Re: [RT] bear market stats
My original contention is that a decline in
market capitalization is a meaningless number since for every loss, someone's
else gains, not necessarily someone in the market. In the Japanese
real-estate example the banks may have been the looser but others gained, if
the borrowers foolishly squandered the money on country club memberships then
it was the country club who gained.
In the case of lastminute.com you said "they
burned thru the money", not "they burned the money". In other words they
spent it. You can not exclude the IPO, I suspect the gainers where the
banks and the venture capitalists who took it public. And, THEY COULD
NOT HAVE DONE SO IF PEOPLE WHERE NOT HYPER-GREEDY, since no rational person
would buy something with no value.
Money can be either concentrated or
defused. If I make a fortune in any venture, I am concentrating
wealth. When I spend (or lose) that money I am defusing it.
There is only one way to create money, thru the input of human energy in the
form of work (mine ore, convert to steel, mill to raw materials, form to
products, ship to stores, sell product). Even an intellectual property
requires work to create. There is only one way to destroy money once
created, thru inflation caused by government. Thru government policies,
inflation can rise faster than work can generate money.
The problem we are undergoing is that vast
numbers of people "FELT" wealthy, smart, powerful (add your own adjective
here), when in fact they where just GREEDY and IGNORANT. Yes,
in a few cases they where deceived but remember, you can not cheat an
honest man and you can not take money in the market from someone who is
not greedy.
Good luck and good trading,
Ray Raffurty
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=bruce.larson@xxxxxxxxxxxxx
href="mailto:bruce.larson@xxxxxxxxxxxxx";>bondo92677
To: <A
title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Thursday, August 01, 2002 4:48
PM
Subject: Re: [RT] bear market
stats
Transfer yes but not necessarily this polarizing transfer
of wealth. Obviously there had to be a few transactions at the
highs or else there wouldn't be any market price. Not too many
people could afford Japanese real estate at its peak. I can assure
you not too many were selling because captial gains tax rates are
prohibitive. It kinda went up and down in a vacuum. Sure,
the bank's were willing to lend plenty based on the land's perceived
appraisal value and that money went into stocks, golf course memberships
and home improvements. I have no idea where Bernie got his shares but I
get the feeling he bought it at a discount from Worldcom and borrowed
heavily to buy it.In the case of Nasdaq stocks obviously there was
plenty of volume at the highs so certainly many cashed out with
riches. But all I'm saying here its theoretically possible that an
asset can fly way up and crash down and everyone can be poorer except
for the issuing company and the fed gov't throught taxation. I
remember in the UK, there was a well publicized IPO aptly named
Lastminute.com (I think) that went public in mid-March 2000 exactly at
the peak. I don't think the stock ever saw the light of day.
The only one who benefitted was the issuing company and I'm sure they've
burned through the cash and shut their doors by
now. --- In
realtraders@xxxx, "Ray Raffurty" <r.raffurty@xxxx> wrote:> If
everyone bought a stock at 100 someone had to sell it at 100.00, the
fact that no one else is foolish enough to buy it is not relevant to the
transfer of wealth. If someone had a $300 M margin call it is
because he purchased $300 M worth of stock from someone, he just did
it with borrowed money. The Japanese purchased their real-estate
from someone.> > There is ALWAYS a transfer of wealth in
every transaction (even theft).> > Good luck and good
trading,> > Ray Raffurty> > >
----- Original Message ----- > From: bondo92677
> To: realtraders@xxxx > Sent:
Thursday, August 01, 2002 12:16 PM> Subject: Re: [RT]
bear market stats> > > Yup, just ask Bernie
Ebbers. $300million margin call wasn't it? The
> Japanese had limitless real estate wealth in the late
80s but could > not sell because of high tax
rates. They leveraged their assumed > wealth until
all the dominoes fell.> Wealth does evaporate without
transfer. A stock does not have to > change hands
to go lower. No bids = lower price. Everyone owns it
> at $100. Next morning its at $10. The only
winners are the corp > issuer which in the case of tech
burned up the cash pursuing > profitless dreams and the
fed gov't which taxes you on your worthless >
unexercised stock options. > > > >
--- In realtraders@xxxx, "Ray Raffurty" <r.raffurty@xxxx>
wrote:> > Wrong, wrong, wrong, wrong, wrong, wrong,
wrong, wrong, wrong, > wrong, wrong, wrong, wrong, wrong,
wrong, wrong, wrong, wrong, wrong, > wrong, wrong,
wrong, wrong, wrong, wrong. If you believe this, STOP
> INVESTING/TRADING NOW. You are in great
danger.> > > > You are only
"wealthy" on paper. You have NO wealth until you take
> profits. A bank will gladly loan you money on 50%
of your paper > wealth, then sell 100% of the position
(or whatever % is required to > make THEM nor you
whole if the stock drops below 40%) at any cost to >
you.> > > > Good luck (you'll
need it) and good trading.> > >
> Ray Raffurty> > > >
> > ----- Original Message -----
> > From: Steve Walker
> > To: realtraders@xxxx
> > Sent: Thursday, August 01, 2002 11:34
AM> > Subject: Re: [RT] bear market
stats> > > >
> > Wealth does disappear to the extent
the market moves higher after >
the> > purchase and then
retreats.> > > >
>>> r.raffurty@xxxx 08/01/02 10:30AM
>>>> > Recently the Democrats
have been harping on the 7.7 trillion loss >
in> > market cap. This shows a total
lack of understanding on how >
markets> > work.> >
> > If a person is stupid enough to by
stock in Dr. Coop.com (fill in >
your> > favorite dead stock) at $80 they
deserve to drive a Dodge Omni >
with> > 100,000 miles (they probably paid
2995.00 for that too).> > >
> The point is that the 7.7 trillion dollars did not
disappear, it > just>
> changed hands. The uninformed and greedy sucker
ALWAYS gets > clipped. >
> CNBC just ran a report about a couple that lost 75% of
their > account in> >
JDSU. Their kid wants to go to Duke University, so they are
> moving,> > riding the
subway, etc. He was man enough to admit it was his
> fault,> > but fell
short of admitting it was GREED, pure and simple, that
> made him> > buy an
over priced stock and IGNORANCE that prevented him from>
> protecting his position with options or even stops.
The person> (s) who>
> sold him JDSU at the top are driving the Porsche because
they > recognized> >
that the market could not go parabolic for long.> >
> > If there is a case of fraud, a stock
holder would have a > legitimate>
> complaint and new laws may address some of this by
returning ill > gotten>
> grains to investors (if the feds can find the
assets). However > in most>
> cases this is not applicable. The vast majority of
losses are > caused by>
> GREED coupled with IGNORANCE. Now the great masses
are crying to > their>
> congress man "They never told me I could
lose".> > > > Good
luck and good trading,> > >
> Ray Raffurty> > >
> ----- Original Message -----
> > From: SLAWEKP@xxxx
> > To: REALTRADERS@xxxx
> > Sent: Thursday, August 01,
2002 6:03 AM> > Subject: [RT]
bear market stats> > > >
> > > > >
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